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County leading economic indicators up in March

The USD Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County rose 0.3 percent in March to 125.1, up from 124.7 in February.

According to University of San Diego professor Alan Gin, who compiles the index, the increase was led by a sharp decline in initial claims for unemployment insurance, which is a positive for the Index. There were also smaller gains in building permits, local stock prices and help wanted advertising. On the downside, consumer confidence and the outlook for the national economy were moderately negative. The positives outweighed the negatives to push the USD Index to its seventh straight increase.

With March's increase, the outlook remains for good growth in the local economy through the end of 2013. For the first quarter of 2013, nonfarm wage and salary employment was up more than 31,000 jobs compared to the same period in 2012, the strongest pace of job growth since 2000.

Sectors showing the strongest gains were administrative and waste services (+6,100), leisure and hospitality (+5,500), professional, scientific, and technical services (+4,300), health care (+3,600), and construction (+1,800). The latter reflects strength in the housing market, where prices are up over 10 percent in the last year, according to the Case-Shiller Home Price Index. Construction employment still has a long way to go to recover the 40,000 jobs lost in that sector from the peak in employment in June 2006.

The trend in residential units authorized by building permits continues to be upward. For the first quarter of 2013, residential units authorized were up a strong 45 percent compared to the same quarter in 2012. There was strength in both single-family and multifamily permits, with the former up 54 percent and the latter 41 percent.

Both labor market variables advanced for the fifth consecutive month. On a seasonally adjusted basis, initial claims for unemployment insurance fell to their lowest level since June 2008. Hiring continues to be strong, with help wanted advertising increasing for the 26th time in 27 months. The net result was that the local unemployment rate decreased to 7.7 percent in March, which compares to a rate of 8.0 percent in February of this year and 9.3 percent in March 2012. This was the first time the local unemployment rate was below 8 percent since December 2008.

One potential worry is consumer confidence, which decreased for the third straight month. This is significant, Gin said, because consumer spending is typically two-thirds or more of economic activity in an economy.

Local stock prices matched the broader stock market in reaching new all-time highs. Local stocks were up 14.51 percent in the first quarter, which compares to gains of 11.25, 10.03, and 8.21 percent for the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite respectively.

The national Index of Leading Economic Indicators dropped in March after three relatively strong gains. Economists typically look for three consecutive changes in the same direction in a leading index as a signal of a turning point for an economy, so the outlook for the national economy remains unchanged for now. Solid growth of 2.5 – 3.0 percent in gross domestic product (GDP) is expected for 2013. The "advance" estimate for GDP for the first quarter of 2013 reinforces this forecast, with an annualized growth rate of 2.5 percent for the quarter. That was below forecasts but far above the 0.4 percent growth rate of the fourth quarter of 2012.

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